Key features of a Limited Liability Partnership (LLP)
Tax implications of LLP
The LLP is a tax-transparent vehicle. Underwriting profits are subject to income tax.
Underwriting profits are deemed to be earned income, and this therefore means that the individual Members within the LLP are assessed for tax purposes, on the basis of their own individual earnings.
Earnings from the LLP are deemed to be earned income for pension purposes. This means that Members can pay all or part of their profits into a personal pension plan (subject to their normal yearly and lifetime UK contribution limits). They are also allowed to claim their appropriate tax relief against income tax.
Trading losses can be offset against future profits made by the LLP or against other income.
After two years of trading, Members are able to claim 100% Business Property Relief on the underwriting capital and assets of the LLP. This reduces the inheritance tax liability on a members’ estate.